Excess IRA Contribution in 2023

[gwarzyn]

How do I report an excess URA contribution  which was withdrawn in January 2024.  My brokerage acccount will not issue any 1099 form reflecting this until end of 2024 tax year

[PatriciaV]

Yes, TurboTax will help you report the excess contribution and the withdrawal. You'll find this topic under Deductions & Credits >> Retirement... >> Traditional and Roth Contributions.

Follow the interview to enter your Roth IRA Contributions. A few screens later, TurboTax will ask if you have any excess Roth contributions, and how much of the excess contribution you will withdraw before the due date of your tax return (look for a page titled "You Currently Have a Penalty"). After you enter the amount you withdrew (or will withdraw), the appropriate adjustment is made.

[gwarzyn]

Thank you.  Do I still report the earnings in 2023 taxes on the excess contributions?  Instructions for Form 5329 says yes but was not sure if I should enter it as coming from my IRA brokerage account. 

[DanaB27]

Yes, you will have to report the earnings on your 2023 tax return. To confirm, this was an excess Roth IRA contribution? 

If yes, then you will get a 2024 Form 1099-R  in 2025 with codes P and J for the withdrawal of excess contributions and earnings. This 1099-R will have to be included on your 2023 tax return and you have two options:  

• You can wait until you receive the 2024 Form 1099-R in 2025 and amend your 2023 return or
• You can report it now in your 2023 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2024 Form 1099-R into the 2024 tax return since the withholdings are reported in the year that the tax was withheld. The 2024 code P will not do anything to the 2024 tax return income but the withholdings will be applied to 2024.

To create a Form 1099-R in your 2023 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2023?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On the "Which year on Form 1099-R" screen say that this is a 2024 Form 1099-R.
11. Click "Continue" after all 1099-R are entered and answer all the questions.
12. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

For your information: Earnings from excess contributions are exempt from the 10% early withdrawal penalty for withdrawals on and after December 29th, 2022.

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2022" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2023.

@gwarzyn 

[fanfare]

Did you use the "Request return of excess and earnings" form ?

If not you'll have to explain to the IRS what you did.

Only any earnings allocable to the contribution are taxable when you withdraw before the return due date.

If done correctly, your (future) 1099R will show that amount.

many filer put this amount on their tax return now before they get the 1099-R 

so they don't have to amend their return later.